Specialist
If you are a member of a company pension scheme, you have to be in that scheme for at least two years to be legally entitled to the value of your employer’s contributions (when I started working, it had just been changed to five years. Before that, you were never entitled to the value of your employer’s contributions if you left before retirement age!).
This can be an issue for some who are in jobs that they don’t really like and want to get out. Even more so if you have decent pension contributions building up.
So how can you get the value of the employer contributions if you don’t have two years pensionable service?
Ask
The first thing to do is ask. The trustees can waive the requirement for 2 year vesting if they wish. They will most probably ask the employer if they want to waive this requirement.
You would typically see them waive it in the case of smaller schemes where there is not a huge turnover of staff. Or if someone was being let go during the first two years of their employment. But it is entirely at the trustee’s discretion.
Transfer in retained benefits
What isn’t at the trustee’s discretion is transferring in benefits from another scheme. When you transfer in benefits from another scheme, those benefits become part of the current scheme.
But as well as the money transferring across, so does the pensionable service. So if I am in my current scheme for 1 year and I transferred in benefits where I was a member for 10 years, I now have 11 years pensionable service. Once the money is transferred in, I am now legally entitled to the value of my employers contributions even if I leave before two years service.
By Steven Barrett of Bluewater Financial Planning